Options indicate short-term bearishness for Bank Nifty

Madhavan M.J Rajalakshmi V._4814 | Updated on August 17, 2018 Published on August 17, 2018

Bank Nifty index met with selling pressure on Thursday as the traders’ sentiment got hit on reports of the country’s trade deficit widening to a near five-year high of $18 billion in July and the domestic currency rupee touching an all-time low of 70.40 versus the dollar.

Bank Nifty August futures contract declined 141.50 points to 27,936. The underlying value of the contract closed at 27,826.55.

Active call options of August 30 expiry

Among the call option chain, the In-The-Money Bank Nifty Call 27,800 option was the actively traded contract on Thursday. The option price was down 23 per cent at Rs 351.35. However, open interest in the contract increased by 17.30 per cent.

Traders have built in some long positions in the contract on declines. The implied volatility of the option price was at 12.90 per cent. It signifies that the Bank Nifty is likely get strong resistance around 28,200 levels in the short-term.

The Bank Nifty Call 28,200 option contract is currently an Out-Of-The-Money option. The option price declined 32 per cent to Rs 153.40. There was an addition of the OI in the contract to an extent of 168 per cent.

The IV was seen at 12.15 per cent that indicates there was good demand for the contract. This implies the Bank Nifty may encounter resistance around 28,200-28,300 levels.

Active put options of August 30 expiry

On the put option chain, the In-The-Money Bank Nifty Put 28,000 option contract was the actively traded one on Thursday. The put option price was up 18.60 per cent at Rs 298.65.

However, the OI declined by 13.45 per cent. The implied volatility was at 12.15 per cent. Traders have reduced their long puts in the contract yesterday. This underscores that the spot Bank Nifty is likely to decline below 27,700 levels in the expiry.

The Out-Of-The-Mmoney Bank Nifty Put 27,700 contract saw maximum addition of OI in Thursday’s trading session. This put option price gained 18.85 per cent and closed at Rs 184.50, while OI increased by 47.40 per cent.

The option price turned expensive with the implied volatility seen at 13.75 per cent. This indicates that the Bank Nifty is likely to decline to around 27,500 levels in the expiry.

Published on August 17, 2018
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